The other side says you're conflicted - must you cease acting?
By Michael Dolan.
You are acting for two friends who purchased a beach house together with a third friend some years ago, but a serious dispute has since arisen between the third friend and your clients as to the beneficial ownership of the property. Legal proceedings against your clients have been commenced. You have just received a letter from solicitors acting for the plaintiff demanding that you cease acting for your clients immediately on the basis that you are conflicted. Must you cease acting? What should you do?
Assertions of conflict of interest on the part of solicitors are not uncommon and often result in applications being made to a court or tribunal for an order restraining the solicitors from continuing to act in a matter.
Courts jealously guard the right of citizens to engage the solicitor of their choice and will only interfere with that right for good reason and in the best interests of the administration of justice.
A recent decision of the Victorian Court of Appeal dismissing an application for an order restraining a firm of solicitors from acting in a
litigation matter between three former friends and workmates who had jointly purchased a beach holiday house in Moggs Creek in 1986 contains
a valuable analysis of the legal principles applicable in situations when an allegation of conflict of interest is made and a restraining
order is sought against the opposing solicitor. (1)
“17 This Court has jurisdiction to make an order, on the application of a party to a proceeding before it, to restrain a legal practitioner from acting for an opposing party in that proceeding. The circumstance which usually gives rise to such an application is where a party seeks to restrain a legal practitioner who previously acted for that party, from acting for an opposing party on the basis that the new representation will involve use by the legal practitioner of confidential information gained in the previous representation.
18 However, the Court’s jurisdiction is not confined to cases involving allegations of breach of confidence. The Court has a broad, inherent jurisdiction to control its officers and protect its processes. As part of this broad jurisdiction, the Court may restrain a legal practitioner from acting in a proceeding where the integrity of the judicial process would be impaired if the legal practitioner did not cease to act. Instances where this jurisdiction has been exercised include where the legal practitioner is likely to be a material witness, where there is a material conflict between the interests of the client and those of the legal practitioner concerning the litigation in question or where, for any other reason, the independence and objectivity of the legal practitioner would be unacceptably compromised.”
The effect of delay:
“57 Even if we had concluded that there was some merit in the applicant’s application for a restraining order, we would not necessarily have granted the application. This is because there is an important discretionary consideration which militates against the granting of the application, namely, the applicant’s delay.”
“60 A party who becomes aware of circumstances which may warrant the making of a restraining order against another party’s legal practitioner must decide whether to make such an application promptly. Timely action is required because the greater the delay, the greater the cost and inconvenience — and potentially the impracticability — of the other party being forced to seek to engage a new legal practitioner in the event that a restraining order is made.
61 Delay that is not satisfactorily explained will militate against the making of such an order. Where an application is delayed for tactical reasons, such as delay pending the outcome of a proceeding, a court would be wary of making such an order. A court will view with disfavour an application that is deliberately held in abeyance and deployed only after a substantive proceeding is unsuccessful.”
Never accept a mere assertion of conflict of interest against you at face value. There must always be a proper basis for it. If in doubt, seek expert professional advice.